Is the Vodafone share price an opportunity at current levels?

Jabran Khan looks at the current Vodafone share price and decides if he would add the shares to his holdings based on recent events.

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Like many stocks, Vodafone (LSE:VOD) saw its share price drop in March due to the stock market correction linked to macroeconomic and geopolitical issues. So what’s the current state of play with the Vodafone share price and is there an opportunity to add the shares at a cheaper price to my holdings? Let’s take a closer look.

Vodafone share price fights back after the correction

As a quick reminder, Vodafone is one of the biggest telecommunications businesses in the world. Here in the UK, it is a major mobile network provider and also operates fibre internet and fintech businesses throughout Africa and Europe. It has approximately 180m customers.

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When the stock market correction occurred in early March, Vodafone shares hit a low of 116p. As I write, the shares are trading for 130p, which is a 12% increase over a 10-week period. To provide a broader picture, the Vodafone share price is trading very close to levels seen this time last year, when it was trading for 128p.

With the Vodafone share price slowly increasing since the correction, is now a good time to add the shares to my holdings?

For and against buying the shares

FOR: Vodafone’s fundamentals and performance looks good to me currently. I do understand that past performance is not a guarantee of the future, however. Looking back, I can see that revenue has grown in three out of the past four years. The exception was a small dip in 2021 due to the pandemic. Full-year results for 2022 were released last week and made for good reading. Compared to 2021, revenue, operating profit, earnings per share, and cash flow increased.

AGAINST: One of my major concerns with Vodafone shares is its current debt levels. In fact, debt increased based on 2022 results, compared to the same period last year. With rising interest rates, this debt could be harder to service and pay down. This could affect returns and the Vodafone share price.

FOR: One of Vodafone’s biggest attractions is its dividend yield. Dividends can boost my passive income stream. The current yield stands at close to 6%. This is higher than the FTSE 100 average which is 3%-4%. It is worth remembering that dividends can be cancelled at any time, of course.

AGAINST: Despite the attractive dividend yield, Vodafone’s current strategy does baffle me a little bit. It continues to shoulder rising debt levels, which are becoming more precarious in the face of current worldwide macroeconomic headwinds, but continues to pay a decent dividend and engage in share buyback programmes. Is this a sustainable position? I’m not so sure.

Here’s what I’d do now

There is a lot for me to consider when deciding whether to add Vodafone to my holdings. Another factor that came into play this month was when UAE-based, state-backed e& (previously known as Etisalat) purchased a £3.3bn stake in the company. This investment caused the Vodafone share price to spike. Could this investment bring with it a renewed focus on strategy with a view to reducing debt and growing performance? Time will only tell but I am buoyed by it as it could provide access to another territory too.

I decided to add Vodafone shares to my holdings. They aren’t the cheapest but the dividend yield, market position, and profile of the business, coupled with this fresh investment, could see the Vodafone share price continue to rise. I also expect to see consistent returns as well.

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Jabran Khan owns shares in Vodafone. The Motley Fool UK has recommended Vodafone. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Should you invest the value of your investment may rise or fall and your Capital is at Risk. Before investing your individual circumstances should be considered, so you should consider taking independent financial advice.

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